Secondaries competition heats up with new Irving Investors’ fund

The fund's strategy will take advantage of the current market setup, Irving Investors portfolio manager Jacob Sonnenberg said.

Yet another venture secondaries fund has come to market as investors are betting that the owners of once highly valued start-ups will sell shares at a discount because they are eager for liquidity.

Growth investment firm Irving Investors announced it has teamed up with Oak Street Investments, a Denver registered investment adviser, to launch Irving Investors OSC Secondaries Fund I. The duo did not disclose the size of the fund, but a Reg D shows Irving Investors OSC Secondaries Fund LLC raised $40 million from 99 investors.

The new fund will pursue a strategy similar to that of Pinegrove Capital Partners, a much larger secondaries fund being raised by Brookfield Asset Management and Sequoia Heritage, which is Sequoia Capital’s wealth fund, as affiliate title Venture Capital Journal previously reported. Brookfield and Sequoia each plan to invest $250 million in Pinegrove, which is seeking a total of $2 billion from institutional investors for its debut fund, according to a report by the Financial Times.

“Pinegrove will buy up stakes in start-ups from venture backers who are under pressure to deliver returns to their own investors, as well as shares in venture funds from people looking to cash out,” the FT story stated.

Likewise, the strategy of Irving Investors’ secondaries fund “is to take advantage of the current market setup, with a significant correction in high-growth tech valuations and a stalled IPO engine since 2021”, Jacob Sonnenberg, a portfolio manager with Irving Investors, said in a statement.

Jeremy Abelson, founder of Irving Investors, said the new fund “will target only what are believed to be the absolute highest quality late-stage companies and we will acquire positions by offering motivated individual shareholders an opportunity for liquidity”.

The fund plans to acquire the positions over the next one to three years. “This strategy should produce a highly concentrated portfolio as the fund has met 600-plus public market hopeful companies over the last 18 months and we have narrowed down our target list to a group of less than 20 high conviction companies,” Abelson said.

The new funds from Irving Investors and Pinegrove may be coming to market at an opportune time. Hans Swildens, founder of Industry Ventures, one of the biggest players in venture capital secondaries deals, told VCJ last week, “There is more than $130 billion of supply, and supply keeps building, but the bid prices are averaging 40-65 percent off NAV, and this is holding back any sellers in the market from transacting”.

VC secondaries deals include shares in VC-backed companies sold by founders, employees and other shareholders, as well as stakes in VC funds that are sold LPs.

Swildens said volume in the first half of this year has been slower than he anticipated. “We estimate that over $35 billion-plus transacted in the first half [of 2023], which is half our estimated volume estimate for the year,” he told VCJ. “It’s unclear if the back half of the year will double to get us $70 billion more of size. If it does get back to that volume, then we will have a $105 billion estimated year in the market.”

Among the largest secondaries transactions in the first half of the year was Stripe’s sale of about $6.5 billion-worth of employee shares in March. In an announcement for the deal, the payments company said it was valued at about $50 billion, down from the $95 billion valuation that investors assigned to Stripe in March 2021.